Defense of System-wide Franchise Claims and Class Actions

Franchisors and manufacturers recognize there are certain cases in which the stakes to the respective parties are higher than normal. Sometimes, it is purely the amount of money at stake in multi-party cases that leaves the franchisor or supplier unable or unwilling to lose. In other situations, it is that the issues involved in the case are so fundamental to the manner in which the franchisor chooses to operate the system that an adverse ruling would destroy its way of doing business.

Whether the basis for class actions or other cases brought by groups of franchisees, dealers, or consumers involves antitrust, challenges to franchisor system supply policies and programs, misuse of advertising funds, or other fundamental issues, these often qualify as “bet-the-business” litigation. When a loss by a franchisor would dramatically undermine it financially or in its control of the system, the franchise itself indeed is at risk. The same holds true in distribution systems when cases are brought by groups of dealers or wholesale distributors. Although many issues that arise in the franchise and distribution contexts are common ones, multi-plaintiff cases and especially class actions are unique and, when they occur, these cases rattle the financial security, integrity, reputation, and foundation of any franchise or distribution system. It is those issues that, if not confronted and handled properly, threaten an entire system’s survival.

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